5 Factors That Affect Builders Risk Insurance Cost
Project Location
The main factor in determining your builders risk insurance cost is where the construction project is located. Insurance companies will based their territory rates based on historic loss history, proximity to fire stations and exposure to potential natural disasters such as wildfires, tornadoes and hailstorms. Properties in coastal areas or very remote areas can increase the chance for losses.
Project Type
Another determining factor in your builders risk price is how your project is classified. Is this new construction or remodeling?
Typically a remodeling project will be rated higher than an new construction project. The reason is that the cost of covering an existing structure is usually higher for an insurance company.
In regards to remodel projects, the type of remodeling done and length of the project can also impact your rate. For example, a non-structural remodel would typically be less expensive than one involving a load-bearing wall.
Construction Type
The higher quality the construction, the better it will withstand perils such as wind an fire. The five major construction types are
1. Fire Resistive
2. Non-combustible
3. Ordinary
4. Heavy Timber
5. Wood-frame
While wood frame is the most common construction type, it is also the most prone to be a total loss in the event of a fire or windstorm and therefore results in a higher rate.
Optional Coverage
Many insurance carriers will offer additional coverage options which may have an impact on your overall rate. These options can include:
- Earthquake damage
- Flood damage
- Business income and extra expense
- Increase costs due to changes in the project
- Material in temporary storage
- Material in transit
- Green building material
- Claim preparation expense
- Contract penalties
Additional Taxes and Fees
To avoid paying extra surplus lines taxes and policy fees, always work with an admitted carrier whenever possible.
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